Managing Global Supply Chain Risk through Disruption Management

Global supply chains are the backbone of modern commerce, enabling companies to source materials and deliver products worldwide. Yet, this intricate web of connections also makes supply chains vulnerable to disruptions. Dr. Robert Handfield’s presentation at the June 2025 ERM Roundtable Summit sheds light on how companies can proactively manage global supply chain risk and maintain resilience in an increasingly interconnected world.

Understanding Global Supply Chain Risk

What is Supply Chain Disruption?
A supply chain disruption is defined as any unplanned delay or stoppage of product flow. Disruptions originating from international sources are particularly challenging, impacting material availability and causing ripple effects across industries.

Why It Matters
Research highlights the steep costs of supply chain disruptions. For example:

• Rice and Caniato (2003) reported daily disruption costs ranging from $50 million to $100 million.
• Hendricks and Singhal (2003) noted an average 10.28% shareholder value loss following supply chain problem announcements.
• Knight and Pretty (1996) found recovery from disruptions can take up to 50 trading days.

The stakes are clear: managing supply chain disruptions effectively is critical for protecting shareholder value and maintaining operational efficiency.

Risk Management Framework: Key Elements

Managing global supply chain risk involves three key elements: disruption discovery, recovery, and redesign.

Disruption Discovery
Supply chain visibility is the cornerstone of effective disruption discovery. To anticipate and detect potential issues, companies need:

• Detailed supply chain knowledge, including product flows, inventories, and lead times.
• External monitoring of political, weather, and labor conditions.
• Emerging tools, such as RFID and dynamic supplier risk indexes, to enhance visibility and manage exceptions in complex global supply chains.

Visibility ensures that companies can quickly flag disruptions and understand their root causes. For example, a retail company benchmarking product flows detected anomalies in truck and shipping schedules, allowing for timely corrective action.

Disruption Recovery
Recovery hinges on strong systems, processes, and people. Key enablers include:

• Experienced and empowered personnel equipped with detailed disruption response plans.
• Visibility tools that provide real-time updates on product flows and locations.
• Proactive planning to address disruptions effectively as they arise.

Dr. Handfield emphasizes that technology alone isn’t enough; recovery efforts must be led by well-trained teams who understand the supply chain inside out.

Supply Chain Redesign
To mitigate future disruptions, companies must focus on flexibility and visibility in their supply chains. Strategies include:

• Building excess capacity at critical points.
• Prioritizing supply chain visibility, especially for inventory levels and sourcing locations.
• Balancing trade-offs between cost and flexibility to enhance resilience.

Key Insights on Managing Disruptions

General Characteristics of Severe Failures
Severe supply chain disruptions often share the following traits:

• They catch companies by surprise due to a lack of foresight.
• They stem from reliance on a single source or location.
• They impact hard-to-replace parts, creating bottlenecks or “choke points” that control material flow.

Discovery and Visibility
Visibility remains the “battleground” for supply chain management. Companies must prioritize horizontal and vertical visibility, using advanced tools like RFID and predictive analytics to flag anomalies.

Recovery through People and Processes
While technology aids detection, recovery is driven by trained personnel. Organizations must cultivate a workforce capable of executing disruption recovery plans with precision.

Redesign for Resilience
Strategic supply chain redesign should focus on integrating flexibility, excess capacity, and visibility. Companies must continuously refine their operations to adapt to an evolving risk landscape.

Strategic Sourcing and Supply Base Management

Strategic sourcing plays a pivotal role in managing global supply chain risk. Companies should:

• Regularly screen suppliers for potential risks.
• Require detailed risk management plans from suppliers.
• Factor disruption costs into sourcing decisions.

Supply base management also includes proactive measures, such as:

• Weekly teleconferences with critical suppliers to address potential issues.
• Incident reporting to analyze root causes of disruptions.
• RFID pilot programs to track containers and enhance visibility in distribution channels.

Operational Issues and Enterprise Risk Planning

Operational issues often arise from inadequate inventory buffers and poor visibility in domestic distribution channels. Companies should:

• Enhance visibility of inventory at the part level to aid contingency planning.
• Train managers and associates on disruption response processes.

Enterprise risk planning involves system-wide modeling to address disruptions. Key strategies include:

• Predictive analytics to identify potential problems at major supply chain nodes.
• Real-time reconfiguration to adapt shipping schedules and contingency plans.
• Supply chain optimization tools to balance cost and flexibility.

Final Thoughts: Preparing for the Future

Global sourcing is on the rise, increasing both the likelihood and impact of supply chain disruptions. With growing complexity, congestion, and interdependence, companies must prioritize resilience.

As Dr. Handfield concludes, “Dealing with disruptions is a critical issue for the future.” Through proactive risk management, supply chain redesign, and a focus on visibility, organizations can mitigate risks and safeguard their operations.

FAQs

What is the most significant challenge in managing global supply chain risk?
The most significant challenge is achieving visibility across all levels of the supply chain to detect and respond to disruptions in real time.

How does visibility help in managing supply chain disruptions?
Visibility allows companies to track product flows, identify choke points, and flag anomalies, enabling quicker recovery and better contingency planning.

What role does strategic sourcing play in managing supply chain risk?
Strategic sourcing involves selecting suppliers based on their ability to handle disruptions and sharing visibility of material flows, which enhances resilience.

How can companies improve disruption recovery?
Companies can improve recovery by training empowered personnel, enhancing visibility, and implementing detailed response plans.

Why is supply chain redesign essential for resilience?
Redesign ensures flexibility and prepares companies for future disruptions by integrating visibility, excess capacity, and optimized processes.

What tools are emerging to aid supply chain risk management?
Technologies like RFID, dynamic supplier risk indexes, and predictive analytics are becoming essential for managing complex global supply chains.